The European Parliament voted on the final text of the fourth AML Directive (“the Fourth AMLD”) on May 20th 2015. We commented on the key changes in our newsletter of March 2015. The final text was published on June 5th 2015 and entered into force on June 26th 2015. European Union Member States have to implement the Fourth AMLD into their national legislation by June 26th 2017.
This article focuses on the inclusion of tax crimes as a predicate offence, a matter that concerns most professionals of the Luxembourg financial industry.
Article 3 (4) of the Fourth AMLD provides that, “‘criminal activity’ means any kind of criminal involvement in the commission of the following serious crimes (…) (f) all offences, including tax crimes relating to direct taxes and indirect taxes and as defined in the national law of the Member States, which are punishable by deprivation of liberty or a detention order for a maximum of more than one year or, as regards Member States that have a minimum threshold for offences in their legal system, all offences punishable by deprivation of liberty or a detention order for a minimum of more than six months”.
This provision derives from the interpretive note to the third FATF recommendation (defining the offence of money laundering), which provides as follows: “3. Where countries apply a threshold approach, predicate offences should, at a minimum, comprise all offences that fall within the category of serious offences under their national law, or should include offences that are punishable by a maximum penalty of more than one year’s imprisonment, or, for those countries that have a minimum threshold for offences in their legal system, predicate offences should comprise all offences that are punished by a minimum penalty of more than six months imprisonment.”
"In Luxembourg, tax fraud and aggravated tax fraud are not specifically listed in Article 506-1 of the Criminal code."
Currently, in Luxembourg, tax fraud and aggravated tax fraud (escroquerie fiscale) are not specifically listed in Article 506-1 of the Criminal code (the Article which sets out predicate offences) and the minimum sanction (imprisonment of at least one month) relating to aggravated tax fraud does not meet the criteria provided for by the same Article 506-1 (1) last indent (minimum of more than six months). Hence, from the strict legal point of view, the Fourth AMLD will not entail any change in the Luxembourg legislation, as the definition of serious offences chosen by Luxembourg is not questioned.
Thus, as regards tax fraud committed outside the Luxembourg territory, whether prosecuted or not, the offence of money laundering committed in Luxembourg relating to such tax fraud may not be constituted, as the double criminality condition still applies: Prosecution of the offense of money-laundering is only possible where alleged misconduct is defined as a predicate offense in both jurisdictions.
However, it remains to be seen whether the Luxembourg Parliament will include tax fraud and aggravated tax fraud in the list of predicate offences. In such case the principle of non-retroactivity of the criminal law would apply. Luxembourg professionals should in any case remain vigilant, as aggravated tax fraud is often committed with other predicate offences such as forgery.
